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Austrian private foundation (Privatstiftung)

How the Austrian private foundation works: the 1993 act, its governing bodies, tax after the 2026 rate rises and the limits nobody advertises.

A Privatstiftung is an Austrian private foundation: a standalone legal entity with no owners and no members, to which the founder transfers assets irrevocably. From that point the foundation lives by the rules written into its deeds, and the board is bound to carry out the founder's intent exactly as it was recorded there. It is the civil law answer to the trust: not a trusteeship, but a fully registered organisation inside an EU member state.

The instrument was designed for one job: keeping an Austrian family business undivided as it passes to the next generation, and keeping the capital in the country. The Private Foundation Act of 1993 (Privatstiftungsgesetz, PSG) gave Austria a domestic option instead of the Liechtenstein one next door. It worked: foundations today hold stakes in thousands of Austrian companies.

At the same time a Privatstiftung is expensive, heavily regulated and fully taxable, and from 2026 the burden has risen across several rates at once. Below we cover the structure, the tax, the real use cases and the limits that rarely make it into brochures. If common law logic suits you better, look at the New Zealand trust.

The 1993 act and what it created

The PSG was passed in 1993 and gave Austria its own form of private foundation. Until then Austrian families structuring capital went to Liechtenstein, and the state decided to offer an alternative at home. In exchange for transparency and registration in the commercial register, the foundation received a soft tax regime: a low rate on the way in and deferred taxation of accumulated income.

The model worked best until 2008. That year Austria abolished inheritance and gift tax, and the strongest argument for a foundation - passing assets to heirs without tax - lost much of its force. At the same time the Stiftungseingangssteuer, a tax on contributions into the foundation, was introduced, and the rates have only gone up since. The number of foundations has been falling since 2012 for exactly that reason: the tax advantage has been squeezed step by step.

The current orders of magnitude: as of May 2025 the Austrian commercial register held roughly 2,955 private foundations, with combined assets estimated at around EUR 70 billion. More than 1,800 of them hold stakes in some 11,000 companies, mostly family-owned, and around a quarter of their assets sit in real estate. This is not an offshore pool but the plumbing of Austrian mid-market and large business, serviced by local lawyers, auditors and banks.

The practical lesson from that history: the Austrian foundation was always a business continuity tool rather than a tax scheme, and whatever tax advantage remained is largely exhausted by 2026.

Structure: capital, deeds and bodies

The PSG requirements are formal and cannot be worked around. The parameters below drive both the budget and the timeline of any project.

Splitting the deeds in two is the defining feature of the structure. The public deed carries the name, the purpose in general terms, the capital and the bodies. The detail - who receives money, on what conditions and how much - goes into the supplementary deed, which is never filed with the register. That delivers everyday privacy but not anonymity: beneficial ownership data goes to WiEReG and is available to tax authorities and obliged entities.

The second point to settle before signing: the foundation has no owner. The founder is neither a shareholder nor a member, and there is no participation to hold or sell. All of the founder's influence comes from what was written into the deeds, plus the right to amend them if that right was expressly reserved. Mistakes at this stage cannot be repaired later.

How the foundation is taxed

The foundation is a full Austrian taxpayer, not an exempt vehicle. The logic runs in three steps: a reduced rate on contributions, an interim tax during accumulation and a final tax when money reaches the beneficiaries.

The interim tax is not final. It is credited back to the foundation when it distributes income to beneficiaries and withholds KESt on that payment. Economically the state takes a prepayment while the money stays inside, and no double charge arises once it leaves. From 2026, however, that prepayment costs 27.5% instead of 23%, which makes long accumulation inside the foundation noticeably more expensive in cash flow terms.

A substance distribution, meaning a return of previously contributed assets, is not taxed, subject to two conditions. All accumulated profits must be distributed first, and only then does the substance layer become available. The amount must also be supported by a dedicated record account, the Evidenzkonto, maintained since 1 August 2008. Without careful multi-year bookkeeping the relief simply does not apply and the payment is taxed as an ordinary distribution.

A separate question is tax where the beneficiary lives. Distributions from an Austrian foundation are almost always taxable in the beneficiary's country of residence, and several countries apply look-through rules that attribute income before anything is paid out. Whether Austrian withholding can be reduced depends on the specific double tax treaty and has to be analysed case by case. Country reference points are collected in the taxes section.

What changed in 2025 and 2026

The 2025 budget consolidation package hit foundations from several directions at once, and every change works against accumulation strategies:

• the Stiftungseingangssteuer rose from 2.5% to 3.5% with effect from 1 January 2026; for real estate contributions the combined burden went from 6% to 7%;
• the Zwischensteuer rose from 23% to 27.5% from the 2026 assessment year, matching the capital income tax rate for individuals. The old rationale, accumulating inside the foundation at a lower rate than a private investor would pay, has disappeared;
• the taxable perimeter widened: distributions from foreign structures comparable to an Austrian private foundation are now taxable, charitable ones excluded;
• from 1 December 2025 extended due diligence and beneficial ownership reporting duties apply, including reporting legal entities holding functions in the foundation, such as a founder foundation, a sub-foundation or a corporate beneficiary. Penalties for breaching the new duties run from EUR 25,000 to EUR 200,000.

The honest summary: the Austrian foundation remains a durable way to keep a business in the family, but it has definitively stopped being a tax optimisation. Anyone choosing it in 2026 is paying for legal certainty, continuity and acceptance inside the EU, not for tax savings. If savings are the headline item in your model, the model is wrong.

What Austrian families actually use it for

The real use cases are narrow and repeat from project to project.

• Keeping the company in one piece. The shares in the operating business move to the foundation. Heirs become beneficiaries and receive income, but cannot split the business, sell a stake to an outsider or deadlock decisions. This is why more than 1,800 foundations hold participations in thousands of Austrian companies.
• Taking the business out of inheritance disputes. The owner's death does not trigger a division of assets, because the owner has not changed: the owner is the foundation. The company keeps trading while the family works things out.
• Providing for the family by rules rather than by agreement. The supplementary deed can set out maintenance, education costs, help with buying a home, conditions and caps on payments, and protection against a spendthrift beneficiary.
• Holding real estate and portfolios. The foundation suits long-term ownership of rental property and securities, where what matters is preservation over decades rather than this year's return.
• Mixed and charitable purposes. A deed can combine family provision with public benefit purposes, a common arrangement among well-known Austrian families.

All of these share one feature: the planning horizon is generational, not annual. For a three to five year objective the foundation is overkill and a holding company will almost always be cheaper.

Limits and what can go wrong

This is the most important part of the conversation, and it belongs before the notary appointment, not after it.

• The assets are gone for good. Revocation is possible only if the founder is an individual and the right of revocation was expressly reserved in the foundation deed. After the founder's death the foundation cannot be revoked at all, whatever anyone wants.
• Exiting is expensive. A payment to the founder on revocation is taxed at 27.5%; the base can be reduced by the recorded entry value of the assets, but any increase in value is taxed. Austrian practice calls this the mousetrap: getting in is considerably easier than getting out.
• The board decides, not you. Beneficiaries cannot sit on the board; that is a mandatory statutory rule, not a matter of drafting. Conflicts between families and boards are a standard fixture of Austrian case law and take years to resolve.
• Forced heirship is not switched off. Austrian succession law expressly treats a transfer into a private foundation as a lifetime gift (section 781 ABGB), and whatever a forced heir receives as a beneficiary of the foundation is credited against the compulsory share (section 780 ABGB). The foundation reorders and organises, but it does not extinguish those rights.
• Commercial activity is prohibited. The foundation may not carry on business beyond an ancillary activity, may not manage a trading company and may not act as an unlimited partner. Holding shares is fine; running the operating business directly is not.
• This is not a privacy tool. The foundation deed is public, beneficial owners are disclosed in WiEReG, banks apply standard due diligence and Austria participates in automatic exchange of information. If the requirement is anonymity, the answer is no.
• Fixed running costs. Three board members, the foundation auditor, bookkeeping, tax filings and legal support form an annual budget that does not shrink in a bad year and has nothing to do with investment returns.

Who the foundation is wrong for: anyone who wants to keep full control of the assets; anyone with materially less than a few million euros; anyone chasing tax savings rather than structure; anyone expecting confidentiality from the state; anyone with a horizon shorter than one generation; anyone planning to run an active business through it.

Privatstiftung, trusts and offshore foundations

The Austrian foundation is usually compared with common law trusts and with offshore private foundations. The differences are structural, and the choice turns not on tax rates but on where the assets and the family actually are.

Its closest competitor by internal logic is the Liechtenstein foundation: the same civil law model with more flexible rules and a different set of trade-offs. The full list of options sits in the trusts and private foundations section, and other Austrian programmes, including residence permits, are on the Austria country page.

Fees

Prices are indicative and cover our work on a standard case. We confirm the exact quote in writing after a short consultation, so you know the final figure before the work starts. Government fees and bank charges are calculated separately unless expressly included.

The project budget combines our structuring work, Austrian notarial and registration costs, the 3.5% contribution tax and annual running costs: fees for three board members, the foundation auditor, bookkeeping and tax filings. The EUR 70,000 minimum capital is not part of the fee - it stays your property inside the foundation.

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